Ever since Thirlwall first presented the Harrod foreign trade multiplier as the appropriate model to explain persistent disparities in the growth rates of the Western countries it has been surrounded by considerable controversy. (See, inter alios, Thirlwall(1979; 1980a and b;1982;1986), McCombie (1985) and McGregor and Swales (1986).) The purpose of this paper is to test the validity of some of the critical assumptions explicit or implicit in the specification of the Harrod foreign trade multiplier using recent annual time-series data from nineteen European and North American countries.The outline of the paper is as follows. In Sections I1 and 111 Thirlwall's model and the data used for estimation purposes are discussed. Section IV presents the regression results and examines their implications. Finally, in Section V, the results and the conclusions are summarized. 11. THIRLWALL'S M O D E L Thirlwall's model consists of two main equations: and M =(P,/P~)*Y=where parameters E, 71, t,h > 0 and < 0.X, M, Y and Z are exports, imports, domestic income and 'world' income respectively. (Pd/PJ) is the ratio of domestic prices to foreign prices, measured in common currency. and t,h are price elasticities and E and n are income elasticities of exports and imports, respectively.Taking the natural logarithms of Equations 1 and 2 and differentiating with respect to *Financial support for this research from the University of Otago is gratefully acknowledged. The author would like to thank Sue Cathro, Christina Cregan and Sally Duncan for their help in preparing the paper.0003-6846/88 $03.00+.12 0 1988 Chapman and Hall Ltd.
1635
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.